Long Term Capital Gains tax for Stocks in US(Microsoft) which were granted as Stock Awards

Hi,

1. Capital gain will be 20% on the capital gain amount (i.e. sale price - indexed price at which you have already paid taxes as perquisite). It would be a long term capital gain if shares are sold after holding for 24 months.

In case of short term capital gain, taxes would be levied as per slab rates without indexation benefit.

2. Yes, you need to pay surcharge at the applicable rate. Current rate of surcharge in your case is 15% on the tax amount. so effective tax rate would be approx. 23% (i.e. 20% + 15% of 20%) on capital gain amount.

3. It's better you sale in US only if effective tax rate in US is less than 23%.

Dear Sir,

Hope you are doing well !!

1.Capital gains/losses arising from sale of equity shares and equity mutual funds are said to be long-term in nature if they are held for more than one year from the date of investment. If the investments are sold before one year, then gains/losses from such sale will be called short-term capital gains/losses.

As per the period of holding of your shares, it would be taxable as Long Term Capital Gains in India.

The long term capital gain will be taxed at 20% (plus applicable surcharge & cess).

2.The Union Budget 2019 has proposed an increase in the surcharge applicable to individuals in select
high income groups. Surcharge rates have been kept unchanged for individuals with annual income
in the Rs. 50 lakh to Rs. 1 crore range (10% for FY 2018-19) and the Rs. 1 crore to Rs. 2 crore range
(15% for FY 2018) in Union Budget 2019. The following are the rate increases that have been
proposed in Budget 2019:

• Surcharge of 25% on annual income between Rs. 2 crore and Rs. 5 crore for FY 2019-20.
• Surcharge of 37% on annual income in excess of Rs. 5 crore for FY 2019-20. 

New rates will be applicable to income earned in FY 2019-20 i.e. AY 2020-21. 

In your case, the surcharge rate would be 25%. 

In addition to surcharge, all individuals who are liable  to pay income tax also have to pay health and education cess on the tax payable. Health and Education Cess is payable at a rate of 4%. It is levied on the tax payable and not on the underlying income. 

3.It is better to sale the same in US to avoid extra taxes.

1. ESOP attracts taxation twice. One at the time of exercising the option which is taxable under the head salaries and other at the time of actual sale under the head capital gain.At the time of exercising the option, diiference of FMV and concessional cost of acquisition is treated as perquisite. At the time of sale, difference between actual sale price and FMV is considered subject to indexation. In your case, holding period of one year would be considered as LTCG/STCG.

2. There are many factors involved in taxation of ESOP which can not discussed here at length. Residential status at the time of Grant period.Before April 2009, FBT was payable by the company on the difference instead of employee.

3. First we are required to calculate your residential status for each year basis on which taxability will be finalized. 

Hello,

1. LTCG Long Term Capital Gain would be applicable on the difference amount of Sale consideration of the stocks and Value considered as perquisite earlier. The long term capital gain will be taxed at 20% (plus applicable surcharge & cess)

2. Yes, surcharge would be payable as per slab rates applicable for surcharge based on your net taxable income.

3. Yes, better if you sell in US itself.

I hope that this answer satisfies your requirements. 

Regards,

CA Hunny Badlani

If the vesting period of stocks is more than 2 years then it shall be considered as long term.

The 1 year rule and 10% tax is for equity listed in Indian stock exchange.

Yes you would be since your income would be in higher slab.

You can save tax by investing in house in India.

If you sell it before coming to India it would be a better option prima facie.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

please note that 10% rate is only in two scenarios:

1. Sales of shares listed on Indian stock exchange; or

2. Sale of unlisted shares by NRI 

Both the above situations are not applicable to you.

If you sale the shares in US and bring money in India, there is no restriction from Indian regulations perspective. You may want to check the regulations in US

Hi,

-Generally, long-term capital gains are charged to tax @ 20% (plus surcharge and cess as applicable), but in certain special cases, the gain may be (at the option of the taxpayer) charged to tax @ 10% (plus surcharge and cess as applicable). The benefit of charging long-term capital gain @ 10% is available only in following cases:

• Long-term capital gains arising from sale of listed securities and it exceeds Rs. 1,00,000 (Section 112A);
• Long-term capital gains arising from transfer of any of the following asset:

a) Any security (*) which is listed in a recognised stock exchange in India;

b) Any unit of UTI or mutual fund (whether listed or not) ($); and

c) Zero coupon bonds

In your case, it is not applicable.

-There is no restriction as per Indian tax laws.

The concessional tax rate of 10% on LTCG is applicable to an equity share in a company listed in a recognized stock exchange in India, in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rule made thereunder.

There are no restrictions on the Indian side. You should check for the US regulations on it.

Yes you are correct as per income tax act the stocks listed in India become long term within 1 year whereas unlisted stocks take 2 year and in same way rate of tax for unlisted shares is 20% and you will get benefit of indexation.

Didn't get your 4th point.

That wont apply in your case as its for listed securities in India.

No you wont have to pay any tax in India then.

You can have a phone/ email consultation if you need any further assistance.